15. Income Taxes

The following table presents the (benefit from) provision for income taxes and our effective tax rate for the three months ended October 31, 2013 and 2012:


	Three Months Ended October 31, 2013
(in millions)	2013			2012
(Benefit from) provison for income taxes	$	(2.0	)	$	2.1
Effective tax rate		35	%		33	%

The effective income tax rate on continuing operations is based upon the estimated income for the year, the composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits, resolutions of tax audits or other tax contingencies.

Our effective tax rate for the three months ended October 31, 2013 approximates the statutory rate of 35%. For the quarter, the tax benefit was increased for certain discrete benefits, consisting primarily of a reduction in valuation allowance associated with the Massachusetts research and development credits and Federal amended tax returns claims, partially offset by changes in statutory tax rates in the countries in which we operate.

The effective tax rate for the three months ended October 31, 2012 was lower than the federal statutory rate due primarily to lower foreign tax rates.

The effective tax rate was higher in the current period than in the quarter ended October 31, 2012 due in part to the relative impact of discrete items on each period’s pre-tax income, and the forecasted composition of the income in different countries.

The total amounts of gross unrecognized tax benefits, which excludes interest and penalties discussed below, as of October 31, 2013 and July 31, 2013 were as follows:

(in millions)


October 31, 2013		July 31, 2013
$7.2		$7.3

These unrecognized tax benefits, if recognized in a future period, the timing of which is not estimable, would favorably impact our effective tax rate. In the next four quarters, the statute of limitations for our fiscal year ended July 31, 2010 may expire for Federal and state income taxes and for our fiscal year ended July 31, 2007 for foreign subsidiaries, respectively. It is reasonably expected that net unrecognized tax benefits, including interest, of approximately $1.3 million may be recognized.

We do not provide for U.S. Federal income taxes on undistributed earnings of consolidated foreign subsidiaries, as such earnings are intended to be indefinitely reinvested in those operations. Determination of the potential deferred income tax liability on these undistributed earnings is not practicable because such liability, if any, is dependent on circumstances that exist if and when remittance occurs. The circumstances that would affect the calculations would be the source location and amount of the distribution, the underlying tax rate already paid on the earnings, foreign withholding taxes and the opportunity to use foreign tax credits.

We are subject to U.S. Federal income tax as well as the income tax of multiple state and foreign jurisdictions. As of October 31, 2013, we have concluded all U.S. Federal income tax matters through the year ended July 31, 2008.

We accrue interest and, if applicable, penalties for any uncertain tax positions. This interest and penalty expense is treated as a component of income tax expense. At October 31, 2013 and July 31, 2013, we had approximately $0.7 million and $0.7 million, respectively, accrued for interest and penalties on unrecognized tax benefits.